The usually spot-on Valleywag misses the mark on Y Combinator. You’ve got to love the snarkiness of the wag, but I think they’re being a little harsh here.

The Ultimate Flip

Let’s not forget, most every company is built to flip in one sense or another. What did Google do with its IPO? They flipped a portion of their company to the public — individual & institutional investors.

It’s still too early to tell if the next Google or Skype will come out of Y Combinator.

How do you tell a 22 year-old to turn down $1m, $3m or $10m in cash?

No, not as an investment in their company, but as an acquisition price. A good chunk of that would go directly into the founder’s pocket.

Much has been written about this before, but most wealthy angels and VCs would discourage (or outright disallow) an acquisition in this range. These investors typically only seek the big home runs that will improve their name brand recognition, and “make the portfolio” (the 1/10 investments that actually generate returns for these funds).

Paul Graham and company, on the other hand, seem okay with the idea of letting these young entrepreneurs get a shot at having a huge chunk of change at an early age. At just 19-25 or so, these kids have plenty of chances to go on and build the next Google, etc.

Aside: Nick Denton, owner of Valleywag and the Gawker weblog network, knows a thing or two about flipping companies. First he flipped First Tuesday in 2001, then Moreover Technologies in 2005. Though his latest venture, Gawker Media is now quite profitable and Nick appears to have no intention of flipping his latest baby!

ps. I’ve flipped several web businesses myself. See Here for more details.